Malaysia’s Luxury Goods Sector

Chapter 1: Introduction

1.1 Introduction

In the 80’s, luxury goods that used to belong to the upper class became visible, recognizable, and accessible to the public. Hence, the market for luxury goods went through an enormous demand growth spurt, and developed into a significant economic sector in the 90’s (Roux and Floch 1996). Louis Vuitton reported sales of nearly 2.5 billion Euros, increasing its net income by 80% between 2002 and 2004 (LVMH 2005).

LVMH Moët Hennessy Louis Vuitton, the world’s leading luxury group, achieved revenue of 4 billion euros in the first quarter of 2008. Organic revenue increased by 12% compared to the same period in 2007, which was also a period of strong growth. As a result of the negative impact of exchange rates, reported revenue growth is 5%. All business groups recorded double-digit organic revenue growth in the period, with the exception of Wines & Spirits. The Group continued to record excellent performances in Asia, the US and Europe.

A good attains the label “luxury” when it has the particular design, quality, performance or durability that is remarkably superior to the comparable substitute. Luxury goods have a lot to do with the consumers psyche and how it makes the person feel. In generally, luxury goods are considered to be the highest quality, and price in the market.

Brand consciousness among the Malaysian society has been increasing over the past few years, especially with the young generation who are now appetite for the luxury goods and brands especially from college, university students and young working adults. The population of the youth for aged between 20 and 29 aged is 20% which nearly make up the entire population in Malaysia.

Understanding the consumer behavior in this age group would be pivotal in ensuring luxury brands can better position themselves in the market and will be useful in marketing building brands. It makes good reason that research on the factor influences generation Y on the purchasing decision of luxury goods.

1.2 Background of Research

“Asia is considered by many international brands as a major sales region, with the improving personal financial status of Asian consumers and with the opening up of various developing markets, there is huge room for growth in the luxury sector,” said Karen Watson, Chief Communications Officer, ACNielsen Company(Consumer and Designer Brands , April 2008).

In Malaysia, the luxury goods sector has been growing along with the rest of the world over the past ten years. We can see that some of the shopping complex such as Kuala Lumpur City Center (KLCC) Mall that sell luxury goods and for up market. Over the years, the setting up for the up market such as Pavilions, The Garden and Star Hills have catered to the increasing demand of luxury goods. “In Malaysia the apparel industry has undergone great transformation with more and more brands entering the market, and the recent past years have seen the entry of numerous international brands. The apparel industry is worth RM 3.26 billion (approximately USD 1.1 billion) (Protégé Associates‟ Independent Market Report (2007)” (Khan and Khan, 2008)

The study on consumer behavior in relevance to luxury goods has gained a lot of interest over the course of the decades. Early research on a framework to define luxury and that of luxury seeking consumers started in the 19th century by Rae (1834). The early research was showed that a summary of the luxury seeking consumer behaviour which can be seen by Vigneron and Johnson (1999) where the values are conspicuous, unique, social and quality. Conspicuous and quality could be seen in the summary luxury seeking framework by Vigneron and Johnson (1999) who presented the luxury value perceptions., It has been stated as the notion of “buying to impress others” by concerning the motives for consuming luxury goods (Wiedman, Hennigs, Siebel, 2007).

Other researches were instrumental on other factors which influence purchase decisions, Khan and Khan (2005) provided the result by showing how reference groups influence on purchase decisions. It focuses on reference groups which are groups that individuals refer when making a purchase. From a consumer behaviour perspective, reference groups are important because they inform and make individuals aware of specific products and brands; provide individuals with opportunities to compare their own thinking with the attitudes and behaviour of the group; and influence individuals to adopt attitudes and behaviour that are consistent with the norms of the group (Khan and Khan, 2005).

Aesthetics appeal on purchasing decision also gained the attention of the researchers. Researchers such as done by Virginie, Irina and Pierre (2009) and Dubois, Laurent, Czellar (2001) influence the purchase decision on luxury goods.

1.3 Research Question

Most of the consumers purchase the luxury goods for one of the following reasons. Purchasing decisions could be influence by the social factor example noted by (Khan and Khan, 2005).Other factors that should be taken into consideration include brand image, conspicuous and quality value which effect the purchase decisions before making the purchase. Aesthetics are also playing a crucial role influence on purchase of luxury goods

Based on the Literature Review in Chapter 2, which provides a detailed look at all the factors and variables above, the research questions at hand has to do with the present variables and the purchase decisions. The questions addressed in this research are:

1.5 Significant of the Study

The luxury goods market is growing rapidly and it is important for research to be done to understand the factors and variables that influence Generation Y purchase luxury goods in Malaysia. The research is important for a number of reasons. The factors influence purchasing decision or consumer behaviours toward luxury goods research has been done in American, Europe or Asia but there is a lack of research regarding purchase decisions on luxury brand products in Malaysia. The only research has been done was by Khan and Khan (2005). The research was about the gender differences in the purchase of luxury goods and covered with social influences and marketing influences.

1.6 Scope of the study

In this research, the research will be conducted under the scope of the purchasing of luxury goods. The research will investigate the factors that influence the generation Y in purchasing decision of luxury goods in Malaysia.

This research is going to focus on generation Y which includes males and females in Malaysia. The age the range of this research on generation Y between 20 to 29. This group of generation Y was chosen because they are college students, university students and young working adults. They are the consumers that showing the greatest purchasing power in the luxury goods market. Questionnaire will be given to the generation Y to know the factors that influence them in purchasing decision on luxury goods.

1.7 Organization of the Research Project

The outline of this thesis can be divided into three main parts. Chapter 1 would be the introduction to the paper, where an understanding of the luxury goods market would be presented, along with the trends the market is heading. A background of the study is also provided, citing the work done by past researchers and their findings. This chapter also provides a clear understanding of the problem statements as well as the objectives of this research paper. Chapter 1 would also justify the need for this research to carried out and provide a summary of the research methodology used to carry out the survey.

Chapter 2 would provide a review on the findings and results of past researchers. Chapter 2 titled literature review would be the assessment on research topics of interest to the researcher, such as topics concerning the factors that influence the purchase of luxury goods. Factors or variables that are being discussed in this chapter include the social influences, perceived conspicuous value, perceived quality value, brand image and aesthetics

Onwards to chapter 3 which is titles research methodology, this chapter would detail the relationships of all the variables present with the theoretical framework. The development of the research hypotheses would also be presented in this chapter along with the sampling design and procedures that would be used in the data collection process. Chapter 3 would then round up by pointing out the methods that would be used for data analysis as well as the variety of tests that would be used to test the hypotheses.

Chapter 4 is the “Data Analysis”, presents and analyses the raw data collected from the survey. After that, SPSS (Statistical Package for Social Science) will be used to present the most accurate statistic data and graph.

Chapter 5 explains the outcomes of the testing of the hypotheses determined from Chapter 4: Data Analysis. The acceptance or rejection of the hypothesis is discussed as well. Additionally, the concluded results of the hypothesis testing from this study are compared with results from previous researches to identify the differences and similarities.

1.8 Conclusion

This chapter has laid the foundation for the entire research. A background of the study was also given to show the progress made by past researchers on the topic at hand. An understanding of the luxury goods industry was presented along with the research questions and objectives this research intends to meet. Thus, the research question, research issues, limitations of the research and outline of the research have been presented, which will provide a guideline for the research. The above information can work as a base and lead into the detail interpretation on the research afterwards.

Chapter 2: Literature Review

2.0Definition of Luxury Goods

The word ‘luxury’ can be defined as state of life in which has uses things that please the senses or pleasing to have but not essential. “A good attains the label as a “luxury” when it has a particular design, quality, performance or durability that is remarkably superior to the comparable substitutes” (Snapshot of U.S Luxury Good Market, 2007).

Dubois, Laurent and Czellar (2001) and Survanasuddhi (2007) stated a definition of the nature and characteristics of the concept of luxury. The six facets are excellent quality, very high price, scarcity and uniqueness, aesthetics and polysensuality, ancestral heritage and personal history and superfluousness.

Luxury goods are rising in popularity especially as consumers’ buying behavior is becoming more symbolized. Consumers feel that by owning luxury products can express their personality and set them apart. Thus, “luxury goods have been defined as goods for which the mere use or display of a particular branded product brings prestige on the owner, apart from any functional utility” (Nia and Zaikowsky,2000)

The term ‘prestige’ was defined as it consists of consumers’ motivations for chasing technical superiority, uniqueness, signaling wealth and status well as aesthetics appeal (Vigneron and Johnson, 1999). ‘Prestige’ and ‘luxury’ are used synonymously in the VIgneron and Johnson’s research. Vigneron and Johnson (1999) categorized three types of prestige brand as upmarket brands, premium brands and luxury brands, respectively in an increasing order of prestige. Hence, it was expected that people would have different perceptions of the level of prestige for the same brands, and that the overall prestige level of a brand would consider the prestige perceptions from different people.

“Luxury brands can be described as premium priced brands that consumers purchase for their psychological values (symbolic and hedonic), and not predominately for their economical and functional value” (Nueno and Quelch 1998; Stegeman, 2006).

However, the definition of luxury goods or brands cannot be fully recognized. The definition of luxury will be different and may not be the same for another researcher. Chadha & Husband (2006) definition limits itself in that it only pertains to luxury fashion goods instead there are other luxury goods that are also both universally available and accepted as luxury. The definition of luxury brands have been defined as fashionable and high quality consumers’ goods made by reputed luxury brands which contained wearable fashion goods such as handbag, wallet, shoes and belt (Chadha and Husband, 2006; Heinemann, 2008). Fashion can be reflection of the social, economic, political and artistic forces of the time.

Accoding to Gao, Norton, Zhang, To (2009), “luxury fashion goods are apparel, accessories, handbags, shoes, watches, jewellery, and perfume for which use or display of particular branded products brings prestige to owners, apart from any functional utility”. Snapshot of U.S Luxury Good Market (2007) stated fashion group represent the major product sector in the luxury goods market. It is important to know that the survey showed that “one sixth (16%) of the world’s consumers claim to buy designer brands” (ACNielsen, 2008).

For this research, the term luxury goods can be defined as the brands that are defined as luxurious in the annual “Consumer and Designer Brand Report 2008” by the global Nielson firm which the survey is the largest and it identified the following goods as the luxury fashion goods.

Calvin Klien Giorgio Armani Celine

Ralph Lauren Louis Vuitton Ferragamo

Diesel Burberry Chloe

Chanel Versace Marc Jacobs

Christian Dior Prada

Gucci Givenchy

DKNY Emporio Armani

Valentino Hermes Fendi

Yves Saint Lauren Max Mara

The fashion goods that show above are not the only goods that are stated as luxury in this research. Consumers allow to evaluate and include other brands which they think is luxury fashion goods for them.

Furthermore, there are many opinions and views of luxury from different leaders’ viewpoint stated in KPMG research (Managing Luxury Brand Growth, 2006). Luxury is explained in the table below as following:

Leaders’ Name and Company

Definition

Because luxury matters in a way that didn’t matter before. Increasingly, luxury is big business: the luxury segment is growing and according to most projections it will continue to grow for the next ten to fifteen years.

2. Belinda Earl,

Jaeger Group’s chief executive

Jaeger is a luxury British brand renowned for designing stylish, innovative and superb quality womenswear, menswear and accessories.

None of us are in the business selling necessities; luxury is the business of creating and satisfying desires.

3. Richard Purdey of gun makers James Purdey and Sons

Famous British gun maker of London, and the name is synonymous with the very finest sporting shotguns and rifles. Purdeys hold or have held numerous warrants of appointment as gun and rifle makers to the British and other European royal families.

A real luxury brands has got to have total integrity. It has to be the buyer that says ‘this is luxury’.

4. Theo Fennell

Theo Fennell is the jewellery maker by using his name for his company ‘Theo Fennel’ in London

Luxury is something that everyone wants and nobody needs.

5. Joseph Wan of Harvey Nichols

CEO of retailer Harvey Nichols

Harvey Nichols is an international luxury lifestyle store, renowned both in the UK and internationally for the breadth and depth of its exclusive fashion merchandise. It offers many of the world’s most prestigious brands in womenswear, menswear, accessories, beauty, food and home.

Luxury is about history. A luxury brand is a lifestyle concept and to be sustainable it has to have history, including a history of quality merchandise and of real luxury customers..

6. Raphael le Masne de Chermont, of Shanghai Tang

Executive Chair of Shanghai Tang

Shanghai Tang is the first luxury brand emerging design from Chiana

It is not in the price, it is in the pleasure you give to the customer. It is to do with creativity, a harmonious aesthetic with attention to details.

7.Christian Hafner

Head of Branding at Swarovski

Luxury is about history, authenticity, depth and being a partner. Buying a luxury product is like a love affair.

2.1Generation Y

Generation Y are also referred as the Millennial Generation or Generation Next or Net Generation describes the demographic cohort following Generation X. Its members are often referred to as Millennials or Echo Boomers. According to Shareef Mahdavi (2008), Generation Y is the term used to describe children of the Baby Boomer generation, typically born between 1977 and 1995. McCrindle (2008) described the generation Y born in between 1980 and 1994. They are also referred to as ‘Millenials’ and ‘Echo Boomers’ in the western society, especially American Society.

Generation Y are individuals who born between 1977 to 1994 that have a free spending spirit and consist of 71 million 8 to 25 year olds (Horovitz, 2002; Sriviroj 2007). The wealthiest groups of people are between the ages of 19 to 25 year olds who are either employed in full time jobs or part time work even though there are group amount of generation Y consumers. The greatest purchasing power in the Generation Y college student takes place within the part-time student, who spends over $400 monthly on discretionary purchases while often maintaining full-time employment (Gardyn, 2002). Those who are either part time or at full time work are college students (Martin & Turley, 2004). Students always work as part time work to find extra funding for their excessive spending during the university hopdays or breaks. There are average 80% of students attending college or university are employed (Martin & Turley, 2004).

The financial knowledge of the average Generation Y consumer also earns them the awareness and respect of marketers even though their spending power alone is enough reason to pay significant attention to this group of consumers. The financial knowledge of the average Generation Y consumer also earns them the respect of marketers today. Generation Y consumers have a remarkable amount of disposable income due to the increasing of greater level in the economy over the past decade (Martin & Turley, 2004). Besides that, the research suggested that “Generation Y has more discretionary income than the previous generations and prefer to spend it on themselves rather than others. A reason for this may be because they are starting families later in life and therefore are able to spend their income on themselves without having to worry about others” (Angela Hughes, 2008)

The important of this group of consumers has taken on the greater level of meaning for marketer. “While the Baby Boomers grew up with television advertising influencing how they were marketed to and how they bought products, Generation Y has many different mediums that they grew up with, which is what makes marketing to them so much more difficult” (Angela Hughes, 2008). Marketers are playing the large part influence consumers’ behaviour through the knowledge of fashion. The reason is that teenagers are concerned about fashion value more than any other age groups (Koester and May,1985; Sriviroj 2007). One of the most influencers is the media because of media consist of a wide range of technology such as television, internet, mobile phone and DVD. (Angela Hughes, 2008, Sriviroj 2007). The internet has permanently changed the way that this generation shops by giving the information about products than the companies give the consumer. According to Angela Hughes (2008), he internet is also a powerful tool for this generation in spreading opinions about products to their peers. The largest differences between Generation Y and those that preceded them are Generation Y’s tremendous awareness and confidence. Generation Y is more likely than any previous generation to look up information before purchasing a product. Generation Y is more desirable to own the products that they know their peers will accept just to show they are part of the group. On the other hand, in the research of Sriviroj (2007) stated that television is strongly influence these generation which affect them as they will reflect their perceptions in “reality” as they have seen in television world. “Of the paid advertising channels of online, outdoor, newspaper, magazine, radio, TV and Theatrical, TV and newspaper are the most trusted media” (Nielsen Global Online Consumer Survey, 2009).

“Generation Y is poised to take over as the largest and most lucrative consumer group for marketers, a position that has long been held by the Baby Boomer generation” (Angela Hughes, 2008). In order to understand the generation Y consumers, it is important to think about factors that motivate these individuals towards the purchasing of luxury goods.

2.2 Social Influence

Previous research shows that group influences play an important role in influencing the purchase decisions (Brinberg and Plimpton, 1986; Martin and Bush 2000; Mascareches and Higby, 1993). The group members have been recognized as determinant of behavior. The fact that the people act in accordance with a frame of reference produced by the group to which they belong is a long accepted and sound premise (Merton and Rossi, 1949). However, many individuals did not behave like the majority of people in their recognized group (e.g., social class or educational level).The casual observation showed perplexing contradictions between group membership and behaviors. According to Merton and Rossi (1994), “a partial solution was found in the concept of “reference group”, which recognizes that people frequently orient themselves to other than membership group in shaping their behaviors and evaluations and that reference groups can perform a diversity of functions.”

Reference groups are generally defined as “actual or imaginary institutions, individuals, or groups conceived of having significant relevance upon an individual‟s evaluations, aspirations, or behavior” (Lessig and Park, 1975; Pertina, Prybutok, Zhang, 2008). Besides that, reference group also can be defined as “a group of people that significantly influence an individual’s behavior” (Bearden and Etzel, 1982). Reference group are important because they make the individual aware to a specific goods or brands and influence individuals to adopt attitude and behaviour that are consistent with the norm of the group.

The normative and informative social influences are the most widely accepted influence. Normative social influence is based on the tendency to conform to the expectation of others while informational influence is based on the desire to make informed decisions and optimize the choice (Stephen Yang and He, 2009; Khan and Khan, 2005). Berden and Etzel (1982) examined that the reference group influence by product and the brand purchase decision. Previous research studied group influences in marketing strategy and consumer’s purchasing behaviour. Specifically, three types of group influences are studied which is information, utilitarian and value expressive influences (Stephen Yang and He; Bearden and Etzel, 1982; Makgosa and Mohube, 2007; Pertina, Prybutok, Zhang, 2008). Informational influence is reflected when an individual perceives enhancement of knowledge and ability to cope with environment when using information from opinion leaders, experts, or product users. Utilitarian influence manifests through the process of compliance with those who can exercise reward or punishment power. Value-expressive reference group function is based on the identification process whereas an individual who associates oneself with a group to enhance self-concept adopts this group’s consumption patterns. Reference groups have been found to specify what the desirable and undesirable goods are (Bristol and Malengburg, 2005; Khan and Khan, 2005). Many researchers have argued that individuals are more susceptible to reference groups influence when the goods is conspicuous and publicly consumed (Bearden and Etzel, 1982; Makgosa and Mohube, 2007; Batra, Homer, Kahle, 2009; Morris and White, 2009).

The influence of a reference group on consumer behavior can be done in one of two ways, either directly or indirectly. In the research Stephen Yang and He (2009), reference groups refer the group that individual has frequent contact with (such as family members, work associates, classmates, friends, etc.). These group is refers to the groups used by an individual to direct one’ purchasing behaviour in particular situation. These are generally referred as direct reference group (Schiffman and Kanuk, 1994). On the other hand, it included “the groups that does not have the membership in or direct contact with, such as certain expected groups or people in a certain social level (Stephen Yang and He, 2009). Based on the work of Khan and Khan (2005), the direct reference group influence was illustrated as “families, friends, co-worker, formal social groups and other leisure groups”. This differs from the indirect reference groups comprise of “individuals and groups that influence consumers’ purchase intentions without having and direct contact such as celebrities and sport personalities” (Khan and Khan, 2005).

2.2.1 Direct Reference Groups

Direct reference groups can be defined as direct contact from the individual or groups with the consumers. With the reference from ….., it showed that families, friends, co-worker, formal social groups and other leisure groups are under this categories. A person has several reference groups for various subjects or different decisions normally. For example, “a woman may consult one reference group when she is purchasing a car and a different reference group for lingerie” (Consumer Behaviour, no date).These direct reference groups are the one who frequently contact with the consumers, It can be seen that the groups views from direct reference groups whether purchase the goods in order to be like group members, believing in group members’ decisions or a sign of wanting to fit in the group.

The previous researchers have carried out the investigations on how the role models (parents, relatives, peers) influence teenagers’ purchase intentions and behavior (Martin and Bush; Subramanian and Subramanian, 1995)) and how parents and peers influence various products and brands’ purchase decisions (Bearden and Etzel, 1982). Researcher has shown that overt family communication can and often does influence younger consumers’ attitudes toward purchases and their consumption patterns (Martin and Bush).

Consumers always do not feel confident enough to evaluate alone. They will consult a friend or partner by inviting them along to a potential purchase can enhance the process. “Having a peer present meant that shop assistants become largely irrelevant and that evaluation of a brand centered largely on initial peer reaction to fit, style and price-based decisions” (Guy W.Mullarkey, 2001). “It is also interesting to note that of all the three direct reference groups, friends tend to exert the greatest influence where individuals purchase brands because they identify themselves with their peers” (Khan and Khan, 2005).

From the numerous researches that have been done, direct reference groups influence make an immediate impact to the consumers. Therefore, it can be concluded that direct reference groups play a significant role in providing relevant information, deemed necessary to make a purchase and conform the group norm.

2.2.2 Indirect Reference Groups

Indirect reference groups is the group that influence consumers’ purchase decisions without having any direct contact with the consumers such as celebrities and sport personalities. Khan and Khan (2005) defined celebrities as “individuals who are well known to the public for their advertisements in areas other than product class endorsed” and that they represent “an idealisation of life”.

In luxury goods industry, it will be much easier by connecting the brand to a celebrity and is even viewed, in some instances, as a necessity. This is because a luxury goods company is in the business of building and selling dreams, and nothing is more helpful in making such dreams concrete and thus more believable in the eyes of the consumer, than communicating it through a famous personality. Celebrities are being increasingly used in marketing communication by marketers to lend personality to their products in India (Matrade Chennai, 2005).

Young consumers especially the generation-Y like advertisement more if they are attracted or admire the celebrities. Positive feelings toward the celebrities and the brand itself will develop more from the young consumers. “Research indicates that celebrity endorsements can result in more favorable advertisement ratings and product evaluations and can have a substantial positive impact on financial returns for the companies that use them” (Silvera and Austad, 2004). Besides that, previous research indicates that celebrities exert influence on consumers purchase intentions and decisions (Martin and Bush, 2000). “Celebrities have also been found to enhance persuasiveness of messages and lead to actual purchases” (Khan and Khan, 2005). For example, Madonna and Demi Moore for Versace—beautiful, successful, mature women in their 40s, transgressive, independent, non-conformist, sexy, etc. (Roncaglia and Brevetti, 2006).

In conclusion, even there is no direct contact with consumers; indirect reference groups have the strong influence to the generation-Y which affects their brand choices toward the luxury goods.

2.3 Perceived Conspicuous Value

with five relevant motivations, and from these identified five different categories of

prestige consumers. According to his study, particularly emphasized the role of interpersonal effects on the consumption of prestige brands, and derived three main effects: Veblen, Snob, and Bandwagon. “The Veblen, snob and bandwagon effects are evident with consumers who perceive price as the most important factor, with a higher price indicating greater prestige. They usually buy rare products and in this way emphasise their status” ((Husic and Cicic, 2008).

In addition, the study also conducted by Vigneron & Johnson (1999) included the conceptualized framework on two main personal effects: Hedonist and Perfectionist. “Hedonists and perfectionists are more interested in pleasure derived from the use of luxury products, and less interested in the price than quality, product characteristics and performance. These consumers know what they want and use their own judgment while price exists only as proof of quality” (Husic and Cicic, 2008).

Perceived conspicuous value which known as Veblen effect is the consumption of the luxury product is viewed as a signal of status and wealth, whose price, expensive by normal standards, enhances the value of such a signal. (Vigneron and Johnson, 1999).

Several researchers demonstrated that price of product have a significant aspect in consumers’ opinion of quality (Vigneron & Johnson, 1999). The price of the product is use to judge quality of the luxury products between different brands. Luxury is an expensive investment. Therefore, a high price has to be justified by an outstanding quality and aesthetics that mass produced goods can’t guarantee (Barnier, Rodina, Florence, 2005). For some consumers, high price equals high quality; therefore, they are willing to pay more for high quality. “Brand exclusivity is the positioning of a brand such that it can command a high price relative to similar products” (Groth and McDaniel, 1993).

In addition, it is suggested that “consumers who perceived price as a proxy for quality, also perceived high prices as an indicator suggesting a certain degree of prestige” (Lichtenstein, Ridgway, and Netemeyer 1993). This statement is further supported in recommend the use of “prestige-pricing strategy” by the marketing literature when appealing to status-conscious consumers (Vigneron and Johnson, 1999; Luong Thi Bich Thuy, 2008).

Numerous researchers have conducted the original work from Bourne (1957), which focused on the influence of reference groups on the consumption of prestige brands (Mason 1981 and 1992; Bearden and Etzel 1982, Vigneron and Johnson, 1999). They found that there was a positive relationship between conspicuous consumption and reference groups. Studies on reference group influence have shown that the “conspicuousness of a product was positively related to its susceptibility to reference group influence” (Vigneron and Johnson, 1999). Additionally, Bearden and Etzel (1982) stated that luxury products that were publicly purchased are more conspicuous products in comparison to products that were privately consumed.

The studies also suggested that the luxury products may used to communicate information about their identity. Veblen (1899) suggested that conspicuous consumption was used by people to signal wealth and by inference power and status. The utility of the luxury products may be to display wealth and one could consider that luxury brands would dominate the conspicuous segment of the consumers.

In conclusion, it can be concluded that conspicuous consumption of luxury goods is used to display wealth, power and status. It is playing significant role that how individual motivated into purchasing luxury goods.

2.4 Perceived Quality Value

Within the field of marketing, the construct of perceived quality has been widely acknowledged as the primary driver of purchase intention (Jacoby and Olson, 1985). According to Vigneron and Johnson (1999), perceived quality value is defined as “luxury is partly derived from technical superiority and the extreme care that takes place during the production process”. Thus, Husic and Cicic (2008) stated perfectionism effect or perceived quality as “perfectionist consumers depend on their own perception of the product’s quality, and may use price as further evidence of quality”.

“Excellent quality is a sine qua non and it is important that the premium marketer maintains and develops leadership in quality” (Quelch, 1987; Vigneron and Johnson, 1999; Dubois, Laurent, Czellar, 2009; Barnier, Rodina, Florence, 2005; Srichan Sriviroj, 2007 ). In a survey conducted by ACNielsen (2008), it was found that on a global average, “28% believe that are of significantly higher quality than standard brands”.

Consumer might own prestige goods because they are likely to be of higher quality (Vigneron and Johnson, 1999). A consumer who own a luxury fashion goods is likely to expect that the goods longevity and durability (Dubois, Laurent, Czellar, 2009; Barnier, Rodina, Florence, 2005; Srichan Sriviroj, 2007; Sarisa Suvarnasuddhi, 2007) compare with mass products. It should become better with time and should not lose its appeal (Barnier, Rodina, Florence, 2005).

According to the Nielsen survey (2009), designer brands stand for fashion and superior quality however in the developing markets of Latin America, Asia, South Africa and the UAE. A half of respondents in these countries think these brands are for fashion followers, and up to 40 percent believe they offer superior quality. Thus, it is interesting that the greatest percentage of people who believe designer brands offer significantly higher quality over non designer alternatives hail from Malaysia, Taiwan, Hong Kong and Turkey.

Luxury and premium brands are expected to show quality and even greater quality as well (Garfein, 1989; Roux, 1995; Vigneron and Johnson, 1999; Srichan Sriviroj, 2007; Luong Thi Bich Thuy, 2008). Groth and McDaniel (1993) stated that “high prices may even make certain products or service more desirable”, because people take that products with high prices with great quality (Rao and Monroe, 1989). In fact, luxury products will lose their scarcity and uniqueness characteristics if luxury products are not priced high (Dubois and Duquesne, 1993). The studies and literature on luxury products suggested that the “quality cue might also be used by consumers to evaluate the level of prestige of brands” (Rao and Monroe, 1989; Vigneron and Johnson, 1999; Luong Thi Bich Thuy, 2008). A low level of quality would play a negative role over the perception of the brand. In contrast, the person’s quality perception would play a positive role over his or her perception of prestige on the same brand if the buyer or the consumer perceives the brand as having an excellent level of quality. (Vigneron and Johnson, 1999; Luong Thi Bich Thuy, 2008)

According to Vigneron and Johnson (1999), it stated that the perfectionist effect exists when consumers purchase luxury items and expects superior products and performance as well as quality. People who represent the perfectionist effect are those “who are assessed to personal values and judge a product according to their value of a luxury brand product” (Srichan Sriviroj, 2007; Luong Thi Bich Thuy, 2008) such as comfort and speed for luxury car or accuracy of the luxury watch.

Even previous researches showed that conspicuous vale is more important effect and evident with consumers who perceive price is the most important factor. However, there were researchers stated that quality value is also important such as Jacoby and Olson (1983). In conclusion, perceived quality value were found important to study and can be use to identify the luxury consumption.

2.5 Brand Image

Brand is a name, term, design, symbol, or any other feature that identifies one seller’s good or service as distinct from those of other sellers (www.marketingpower.com; Iyiade Adedamola Taofik, 2009; Suvarnasuddhi, 2007). In the research of Korchia (1999), “image creates value in a variety of ways, helping consumers to process information, differentiating the brand, generating reasons to buy, giving positive feelings, and providing a basis for extensions”. Cheng (2006) stated that brand is important because the consumers’ perception of a product can be affected by the added value of a brand. “Brands signal to consumers the quality of a product, the image that it is meant to convey, as well as representing particular current garment styles and trends in a fashion context” (Keller, 1993; Guy W.Mullarkey, 2001).

Brand image can be defines as “perceptions about a brand as reflected by the brand associations held in consumer memory” (Keller, 1993; Cheng, 2006; Rio, Varques, Iglesias, 2001). Many researchers have been agreed the important of brand image. Brand image is pivotal because it influences purchase intention and consumers’ preference as well as they are willing to recommend to others and willing to pay higher price (Forsythe, Kwon, P.Leone, Shannon, 2008; Aiello, Donvito, Godey, Pederzoli, Wiedmann, Hennigs, Siebels).

“To succeed in the changing marketplace, a designer brand needs to sell its core brand values; the “image” reflected in the design and the lifestyle it represents is what consumers pay a premium to buy into” remarked byKaren Watson, Chief Communications Officer, The Nielsen Company.

Consumers able to difference the product differentiation, decrease the purchase risks, obtain several experience and recognize the product and its quality through brand image (Lin and Lin, 2007). “The personal identification function is related to the fact that consumers can identify themselves with some brands and develop feelings of affinity towards them” (Rio, Varques, Iglesias, 2001). It refers to correspondence between consumers’ behaviour, self image and image of the product. Through the image of the products the consumers buy and use, his or her self image can be improve based on the theory. It also can be inferred that “individuals prefer brands that have images compatible with their perceptions of self” (Chiu, Lin, Chiu, Chang). In addition, a positive brand image able to lower the products purchase risks and increase the positive feedback from consumers. “Consumers are more likely to purchase well known brand products with positive brand image as a way to lower purchase risks” (Akaah and Korgaonkar, 1988; Aiello, Donvito, Godey, Pederzoli, Wiedmann, Hennigs, Siebels). Hence, consumers feel it is less risky by purchasing branded products.

“The country of origin of a brand is also an influential factor for consumers choosing a product in both Asia and in Western countries” (Pervin). There are many researches suggested the country of origin influence on consumer perception and behaviour through the image of the product’s country of origin (Phau and Leng, 2008; Forsythe, Kwon, P.Leone, Shannon, 2008; Aiello, Donvito, Godey, Pederzoli, Wiedmann, Hennigs, Siebels). It creates positive brand image to increase the possibility for the products to be chosen and also raise the inferior image of the country of origin (Thakor and Katsanis; 1997 Lin and Lin, 2007). According to Grewal, Krishnan, Baker, and Borin (1998), the better a brand image is, the more recognition consumers give to its product quality.

In summary, it can’t be denied that brand image plays a pivotal in shaping consumers’ perception of a brand. Thus, it can be conclude that brand image is crucial to the consumers’ purchase decision.

2.6 Aesthetics

“An aesthetic object is defined as an object produces a sensory response in an audience such as satisfaction, pleasure or affect” (Fine, 1992; Eisenman, 2009). The researches from Barnier, Rodina, Florence (2009) shows that the aesthetics are primary importance because the dimension colour, design and beauty create by style. The aesthetics dimensions of goods are anticipated but also presented as well as from the people who consume these goods (Dubois, Laurent, Czellar, 2001). According to Eisenman (2009), aesthetics of the products are increasing in important competitive dimension from the prominent firms who appear to be giving aesthetics.

The consumers are attracted by the colour, originality of its design and style at the first place. According to Barnier, Rodina, Florence (2009), the beauty and originality of the products can be show by the combination of the colour and the material which are playing the important roles of design and style. Beauty of the product is really important because it motivates and encourages to touch and feel the products.

Luxury can enhance the self concept of individual consumer (Suvarnasuddhi, 2007; Dubois, Laurent, Czellar, 2001). Luxury brands build up to become a part of the self in terms of identity where possessions influence their distinctiveness onto the individual and vice versa. By asserting that an object is ‘mine’, it is showing ownership and connection that the object is a reflection of the person (Suvarnasuddhi, 2007).

“Because an object is identified as luxury, consumers expect a superior good and experience to come out of it, gravitating the consumer into another level of consumption unique only to luxury brands” (Suvarnasuddhi, 2007). The luxury is a source of sensual pleasure where the consumers able to receive a pleasurable of excellence and refinement. It is not only about the quality but it also pleasant smell, touch, taste or hear. Hence, the consumption of luxury as hedonic experience allows the consumer to touch all the senses (Dubois, Laurent, Czellar, 2001; Barnier, Rodina, Florence, 2009). According to Sriviroj (2007), the youth significantly represent the hedonistic effect in their attitude towards luxury items which further show that group norms are not able to influence the youth. On the flip side, they can achieve self fulfillment by owning luxury goods. “They look for exclusive benefits and if products create an emotional value for consumers it represents that the product has been beneficial” (Sriviroj, 2007). The emotional value that the youth look for include pleasure, excitement and aesthetic beauty.

In conclusion, it was found that aesthetics was found to be importance to the study. It effects the purchase decision of generation Y on luxury fashion.

2.7 Chapter Summary

Chapter 2 with regards to literature review is in essence a review on the findings and results of past researchers. An assessment of all the topics of interest is provided with an introduction to all the factors that have an influence over a consumer’s purchase of luxury goods. Chapter 2 started by providing an idea of the global luxury goods market followed by the first factor or variable of interest, which is the social influence by direct and indirect reference groups, followed by a detailed discussion on the other factors, such as the perceived conspicuous and perceived quality value on purchase decisions. Next, brand image was discussed. Lastly, the issue of aesthetics and its influence on the purchase of luxury goods was also discussed.

Chapter 3 Research Methodology

3.0 Overview

As chapter 1 had discussed about the introduction to the research and chapter 2 had provided an insight into the literature review, chapter 3 would be focusing on the research methodology that would be carried out during the course of the research. In essence, it is the foundation of how data would be collected and analyzed.

Chapter 3 would begin by discussing on the theoretical framework designed specifically for this paper, encompassing and providing an overview and relationships of all the variables present in this research. From then on, 3.2 would discuss about the different forms of hypotheses development and the chosen method for the researchers hypotheses. Proceeding through, 3.3 would discuss about the sampling design, or in other words, how the researcher intends to represent the target population. This section also gives detailed steps on the researcher’s planned implementation of a pilot test, the sampling design method used and the sampling procedures that would be initiated.

Section 3.4 would then touch base on the data collection methods that would be used by the researcher, both secondary and primary sources. The data analysis section would be under 3.5, where techniques regarding the methods of data analysis and hypotheses testing would be discussed.

Chapter 3 would then conclude with a chapter summary at 3.6.

3.1 Theoretical Framework

The theoretical framework has been created to be a “conceptual framework of how one theorizes or makes logical sense of the relationships among the factors that have been identified as important to the problem” (Sekaran, 2003). It is developed to have an insight into the inter-relationships among the variables that exist in this research.

Throughout this research, there are three set of variables have been identified to be of utmost importance to the researcher and can be categorized as the dependent and independent, and moderating variable. The dependent variable is the variable of primary interest to the researcher, in order to predict its variability. This variable is often known as the outcome variable. In this research, the dependent variable refers to the purchase of luxury goods by Generation Y. The independent variables on the other hand, are the factors that influence the dependent variable in a positive or negative way or in this context, the factors that influence the purchase of luxury goods. Figure 3.1 provides an insight into the relationship between both set of variables.

Independent VariablesDependent Variable

3.2 Hypotheses Development

A hypothesis can be defined as “a supposition made on the basis of limited evidence as a starting point for further investigation” (www.askoxford.com).

Generally, reference group influence is a group of people influences the individual’s behaviour. They give the information and provide the awareness to specific brands or products. The reference groups influence can be affected through peer, families, celebrities and others are the key that etermine the purchase decision of Generation Y. “People tend to behave in accordance with a frame of reference produced by the groups to which they belong” (Bearden and Etzel 1982). Therefore, this study believes that the association exits between reference groups influence and purchase of luxury goods. To empirically proven this association, the first hypothesis of this study is formed as followed:

H1: There is a significant relationship between reference groups influence and purchase of luxury goods.

The conspicuous consumption is used to display wealth, power and status. Veblenian consumers attach a greater importance to price as an indicator of prestige because they wan to impress others. Price of the products determine the quality of the products which used by the consumers to judge the products. The researches show that “conspicuousness of a product was positively related to its susceptibility to reference group influence” (Vigneron and Johnson, 1999). Besides that, identity or self concept also has been display from the consumers to show the status and wealth. The conspicuous consumption had dominated in numerous researches, and it can be stated that conspicuous is important to be identify as perceived value (Vigneron and Johnson, 1999). Thus, the following hypothesis is formed for the association between perceived conspicuous vale and purchase of luxury goods.

H2: There is a significant relationship between perceived conspicuous value and purchase of luxury goods.

The perfectionist effect exists when “consumers purchase luxury items and expects superior products and performance as well as quality” (Vigneron and Johnson,

1999). The research conducted by Barnier, Rodina, Florence (2005) found that quality is the main criteria lead to luxury purchase. According to Luong Thi Bich Thuy (2008), “the consumer’s quality perception would play a positive role over his or her perception of prestige over the same brand if the consumer perceived the brand as having an excellent level of quality”. Thus, the following hypothesis is formed for the association between perceived quality vale and purchase of luxury goods.

H3: There is a significant relationship between perceived quality value and purchase

of luxury goods.

Brand image can be defines as “perceptions about a brand as reflected by the brand associations held in consumer memory” (Keller, 1993; Cheng, 2006; Rio, Varques, Iglesias, 2001). It influences consumer perception and crucial to purchase choice. Consumers able to evaluate the products, lower the purchase risk, obtain experience and recognize the product differentiation through brand image. According to Grewal, Krishnan, Baker, and Borin (1998), “the better a brand image is, the more recognition consumers give to its product quality”. Thus, the fourth hypothesis of study is as follow:

H4: There is a significant relationship between brand image and purchase

of luxury goods.

Aesthetics have strong influence on purchase of luxury good and it should always be the case according to Dubois, Laurent, Czellar (2001). Aesthetics reflects a sensory response in an audience such as satisfaction, pleasure or affect. “The aesthetics dimension is composed of design, colour and style that create beauty, they are of primary importance” (Barnier, Rodina, Florence, 2005). The research also proved that French, Russian and UK consumers have a hedonic approach for luxury derived from aesthetics which Aesthetics dimension in France earned the highest position, 29%, in comparison to Russia, 19% and the UK, 15%. Hence, the fifth hypothesis is formed for the association between aesthetics and purchase of luxury goods.

H5: There is a significant relationship between aesthetics and purchase of luxury goods.

3.3 Population and Sampling

3.3.1 Population

“Population can be defined as total number of inhabitants constituting a particular race, class, or group in a specified area.” (http://www.answers.com/topic/population, no date). With reference to the topic at hand, the researcher has set that the target population for this research would be the Generation Y in Malaysia. Even the generation Y has been defined as born in between 1977 and 1994 by Horovitz (2002) and Sriviroj 2007, the study would survey specifically generation Y who are aged between 20 and 29 which focus on the college students, university students and young working adults.

3.3.2 Pilot Test for Questionnaire

“Pilot test is a smaller version of a larger study that is conducted to prepare for that study to ensure that the ideas or methods behind a research idea are sound, as well as to “work out the kinks” in a study protocol before launching a larger study.” (http://ms.about.com/od/newsresearch/g/pilot_study.htm, no date). In this research, the researcher intends to conduct a pilot study containing 10 questionnaires to university students in Multimedia University Melaka in order to justify the content and reliability of the questionnaire. This is done as the researcher feels that the students in the University campus serve as a just representation of the intended target population. The feedback from the respondents will be corrected before distributing to the targeted respondent.

3.3.3 Sampling Design Method

A sample of the population can be drawn from one of two ways, either in the form of probability sampling or non probability sampling.

Sekaran (2003) described that “when elements in a population have a known chance of being chosen as subjects in the sample, we resort to probability sampling design”. There are several forms of probability sampling. The first is simple random sampling which also known as unrestricted sampling. In a simple random sample (‘SRS’) of a given size, all such subsets of the frame are given an equal probability. Each element of the frame thus has an equal probability of selection. Simple random sampling is also known as unrestricted sampling. The other form is known as restricted or complex probability sampling. “The main difference between the two is that efficiency is improved in that more information can be obtained for a given sample size using some of the complex probability sampling procedures” (Sekaran, 2003). Example of this form of sampling is the stratified random sampling method where the population is divided into subgroups and subsequently sub samples.

On the flipside, Sekaran (2003) stated that non probability sampling designs are those where “elements in the population do not have any probabilities attached to being chosen as sample subjects”. One popular mode in this kind on sampling is the convenience or accidental sampling method. It is one “that is simply available to the researcher by virtue of its accessibility” (Bryman and Bell, 2003). The selection of units from the population is based on easy availability and/or accessibility in convenience sampling. The researcher intended to proceed with the convenience sampling method based on two reasons. First of all, the data can be collected easily which is the main advantage and another advantage is that it is much cheaper to implement than probability sampling (Jankowicz, 2005).

3.3.4 Sample Size

The question of how many people should be in one’s sample depends on the form of sampling adopted. “Convenience sampling, sometimes called grab or opportunity sampling, is the method of choosing items arbitrarily and in an unstructured manner from the frame”. (www.wikipedia.com, no date). A total of 200 Generation Y would be surveyed in Malaysia.

3.3.5 Sampling Procedure

The sampling procedure would start once the feedback from the pilot study and the questionnaires for the survey is finalized. The questionnaires would be by printed handouts of by the researcher to the general public who fall under the age range of 20 to 29 years of age. This would typically be done in the State of Melaka, Kuala Lumpur and Pulau Pinang. A total of 500 printed questionnaires would be given out in the process.

3.4 Data Collection method

3.4.1 Secondary Data

Through this research, secondary data is collected from mainly journals especially in those area concerning consumer behavior and luxury goods, informational website, articles, and books. Previous researches from a variety of authors were found from databases that include Emerald, Google Scholar and others. These sources of data provided useful background information on the luxury goods market, as well as indicating investigations that had already been taken place.

3.4.2 Primary Data

Sekaran (2003) stated “data gathered for research from the actual site of occurrence of events are called primary data”. The questionnaire will be used as the primary method to collect primary data on the factors that influence Generation Y on purchase of luxury goods.

3.5 Data Analysis

There are 3 objectives in the usage of data analysis. “Getting a feel for the data, testing the goodness of the data and testing the hypotheses developed for the research” (Sekaran, 2003). The first objective of getting a feel for the data is to get an idea of how the respondents reacted to the questionnaires and how they are answered. The second objective of testing the goodness of the data is to test the reliability of the data gathered. Lastly, is to test the hypotheses of the research with various research tools.

3.5.1 Descriptive Analysis

Descriptive analysis will be conducted to examine the background of the respondent and the pattern of their responses. Frequency analysis will be carried out to study the background of the respondents that contribute in this study. The mean, range, standard deviation and variance would also be calculated using the Statistical Package for Social Science (SPSS) to show the variability of the data and gauge the pattern of the questions answered.

3.5.2 Hypotheses Testing

After the data is ready to be analyzed, the testing of the hypotheses would be the next logical step. There are many frequent hypothesis testing modules used by researchers to test their hypotheses. The researcher has decided to use the ANOVA, Pearson correlation, and Reliability Analysis for this research.

3.6 Chapter Summary

In this study, the framework has been developed to meet the objectives of the study. Hypotheses have been developed from the framework and questionnaire has been designed to collect the primary data for the study. Next, the sampling design and methods to obtain data were considered and discussed for this study. The results of the primary data will be analyzed by using SPSS. Results of the analysis and interpretation of the results are presented in the next chapter.